: S N Dhingra

J.K. Industries Limited vs D.S. Strategem Trade A.G. on 4/12/2007

ORDER
Shiv Narayan Dhingra, J.
1. This Petition has been filed under Section 34 of Arbitration and Conciliation Act, 1996
challenging the award dated 24th September, 2004 passed by a Tribunal of Arbitrators.
2. There was an agreement for supply of 5,00,000 metric tonnes of Romanian origin Urea
for fertilization, between the Petitioner and the Respondent. Article 10.1 of the agreement
provided that parties shall amicably settle the dis-agreement or dispute which may arise
between them. In any case that the dispute cannot be settled amicably then it shall be
submitted to the International Chamber of Commerce in Geneva (Switzerland). Article
10.2 provided that parties have agreed to voluntarily execute the award of Arbitration and
in case of default, the award could be enforced through the competent courts of law of
Geneva (Switzerland).
3. After the dispute arose between the parties the respondent referred the matter to the
International Chamber of Commerce in Geneva. The Secretariat of International
Chamber of Commerce informed the petitioner about the request of the respondent and
also asked the petitioner to appoint one Arbitrator. Vide its letter dated 10th October,
1991, Petitioner appointed Mr. B.Sen as Co-Arbitrator. During pendency of Arbitration
proceedings in 1994 petitioner filed a suit before this Court seeking declaration that
agreement dated 7th January, 1991 entered between the parties was not a concluded
contract. In this suit an application for interim relief was filed and this Court vide order
dated 13th March, 1995 directed that further proceedings before the Arbitrator shall
remain stayed. However, this Civil Suit was later on withdrawn by the petitioner. The
Arbitrators were informed by the petitioner regarding interim stay granted by this Court.
Vide a letter dated 14th March, 1995 International Chamber of Commerce Secretariat
transmitted to the parties that the Arbitral Tribunal had decided to proceed with the
hearing notwithstanding the stay granted by this Court. The Tribunal concluded its
hearings and passed an award which is the subject matter of challenge in this petition.
4. The petitioner has challenged the award inter alia on the ground that the award has
been made in complete defiance of this Court's order dated 13th March, 1995 and was
therefore in conflict with the Public Policy of India. The Tribunal's decision to proceed
with the hearing despite stay order of this Court was contemptuous.
5. The challenge to the award on this ground must fail. The petitioner had withdrawn the
suit filed by it in which order dated 13th March, 1995 was passed. The interim order
passed by this Court became non-existent once the suit was withdrawn. The petitioner
cannot say that the continuation of proceedings by the Arbitral Tribunal was in contempt
of the Court. Moreover, the Arbitral Tribunal had asked the respondent if he wanted to
wait for the result of the suit filed by the petitioner or he would like to take the risk of the
difficulties in execution of award. The claimant had categorically stated that he would
suffer the risk of the difficulties in execution and requested the Tribunal to continue with
the arbitration. The Tribunal had communicated this decision to the claimant.
6. The jurisdiction of the Court runs within the territory of India; the jurisdiction of this
Court does not run outside the territory of India. The Tribunal was working at Geneva.
The arbitration agreement categorically noted that the award was executable only through
the courts of law of Geneva. This Court could not have passed an order staying the
arbitral proceedings. In Bhatia International v. Bulk Trading S.A. and Anr. Supreme
Court observed that there cannot be applications under Section 9 for stay of arbitral
proceedings or to challenge the existence or validity of arbitration agreements or the
jurisdiction of the Arbitral Tribunal. All such challenges would have to be made before
the Arbitral tribunal under the Act (para 29). I consider that the award cannot be set aside
on this ground.
7. The petitioner also contended that no permission of RBI was taken before entering into
contract. The award granting damages to respondent therefore, violates Public Policy of
India as envisaged under FERA. I consider an award cannot be set aside because at the
time entering into the contract permission of RBI was not obtained. If such a permission
is necessary, it can be obtained by the party concerned before it receives the actual
payment.
8. There are various other grounds taken by the petitioner in the petition. I consider that
this Court need not go into those grounds as this Court considers that the petition filed by
the petitioner under Section 34 of Arbitration and Conciliation Act challenging the
foreign award was not maintainable. It is not disputed that the arbitration agreement
provided that jurisdiction of only courts of law in Geneva(Switzerland) can be invoked
for execution of the award and the disputes are to be submitted to the International
Chamber of Commerce in Geneva. The Tribunal after considering documents and
arguments of both the sides came to the conclusion that the law of Switzerland would be
applicable between the parties for contractual obligation. The petitioner has sought to
invoke the jurisdiction of this Court on the ground that one sitting of the Tribunal had
taken place in India. I consider that holding of one sitting by Tribunal in India would not
change the character of Award. The entire proceedings of Arbitration Tribunal had taken
place in Geneva. Petitioner submitted to jurisdiction of Tribunal constituted as per rules
of International Chamber of Commerce and Arbitration was conducted as per rules of
International Chamber of Commerce. The law applicable was that of Switzerland and
award can be executed only through Courts of Switzerland. The award passed by the
Tribunal is a foreign award. Provisions of Section 34 would not be applicable to this
award.
9. This Court in Bulk Trading S.A. v. Dalmia Cement (Bharat) Ltd. 2006(1) Arb. L. R 38
(Delhi) had held that an application under Section 34 was not at all contemplated insofar
as foreign award was concerned. In Bharat Aluminum Company Ltd. v. Kaiser
Aluminum 2006(1) Arb. L. R. 113 (Chattisgarh) (DB), a Division Bench observed that an
application under Section 34 was not maintainable against the foreign awards. In Inventa
Fischer GMBH and Co., K.G. v. Polygenta Technologies Ltd. 2005(2) Arb.L.R. 125
(Bombay) and in Goldrest Exports v. Swissgen N.V. and Anr. 2005(2) Arb. LR 306
(Bombay) a Single Bench of Bombay High Court also had similar views that foreign
award cannot be challenged by invoking provisions of Section 34. This view was
confirmed by the Division Bench of Bombay High Court in Goldcrest Exports v.
Swissgen N.V. and Anr. 2005(3) Arb.LR 58 (Bombay) (DB) that being a foreign award,
remedy of a party against whom award is sought to be enforced lies only under Section
48 and not under Section 34.
10. I consider that a foreign award cannot be challenged under Section 34 of the
Arbitration and Conciliation Act. This petition is hereby dismissed